NEW YORK: The New Zealand dollar has hit a three-week high against the Aussie after New Zealand’s Reserve Bank reiterated that interest rates are expected to remain on hold for ‘some time’.
The comment comes in the same week that Australia cut its rate by 25 basis points following moves lower by many other central banks.
The kiwi touched 95.08 Australian cents, and was trading at 94.91 cents at 8am in Wellington, from 94.86 cents at 5pm on Wednesday.
The local currency slipped to 73.68 US cents from 74.05 cents as commodity currencies declined after oil prices dropped following a report that showed US inventories were at record levels.
NZ Reserve Bank governor Graeme Wheeler, in the bank’s traditional scene-setting major speech to start the year, said keeping interest rates on hold at 3.5 per cent for now was more prudent than contemplating a cut.
That contrasts with the outlook in Australia, where its central bank this week reduced the benchmark rate to a record low 2.25 per cent and where further reductions are expected.
‘In a world where central banks are racing to the bottom to lower interest rates, holding rates is now the ‘new hawkish’ which will attract investors hungry for yields,’ said Matt Simpson, senior market analyst at ThinkForex in Melbourne.
‘The divergence between the two economies should continue for ‘some time’ but with the RBA expected to lower rates quite soon, I expect the downside move (in the Aussie) to increase with momentum.’
New Zealand markets are closed on Friday for the Waitangi Day public holiday.
The New Zealand dollar fell to 4.6029 yuan from 4.6269 yuan after The People’s Bank of China joined others around the world in adopting a more accommodative policy stance, to bolster its economy.
The kiwi fell to 48.44 British pence from 48.86 pence, weakened to 86.49 yen from 87.30 yen and was little changed at 64.53 euro cents from 64.59 cents. The trade-weighted index weakened to 76.35 from 76.57.
